Amgen Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2023

There are 20 speakers on the call.

Operator

My name is Julianne, and I will be your conference facilitator today for Amgen's Third Quarter 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. There will be a question and answer session at the conclusion of the last speaker's prepared remarks. In order to ensure that everyone has a chance to participate, we would like to request that you limit yourself to asking one question during the Q and A session. I would now like to introduce Justin Clays, Vice President of Investor Relations.

Operator

Mr. Clays, you may now begin.

Speaker 1

Thank you, Julian. Good morning and welcome to our Q3 2023 earnings call. Bob Bradway will lead the call and be followed by a broader review of our performance by Murdo Gordon, Vikram Karnani, We joined Amgen from Horizon Therapeutics following the October 6, 2023 acquisition close, Dave Reese and Peter Griffith. Given the timing of the Horizon Therapeutics acquisition close, our 3rd quarter results do not include any contribution from Horizon. Vikram will provide select information from Horizon's 3rd quarter product sales for future context.

Speaker 1

You should have received a link to our slides that we have posted. Through the course of our discussion today, we will make some forward looking statements and use non GAAP financial measures to describe our performance. Just a reminder that actual results can vary materially. I would now like to turn the call over to Bob.

Speaker 2

Okay. Thank you, Justin, and Thank all of you for joining our call. It's an exciting time here at Amgen. And we're continuing to execute well this year, serving many more patients around the world With medicines such as Repatha, Evenity and TESPYRE, advancing a number of promising first in class medicines rapidly through our pipeline and preparing for our next wave of biosimilar launches. However, as this is our first earnings call following the close of our acquisition of Horizon Therapeutics, I thought we might turn our attention there first.

Speaker 2

The Horizon acquisition coupled with our purchase of ChemoCentryx, which we acquired a little more than a year ago, gives Amgen a significant rare disease business that fits squarely within our overall strategy And we'll be additive to the growth we expect from our base business. At the heart of our strategy, of course, is innovation, First, we're best in class medicines that make a big difference for patients suffering from serious diseases. The medicines in our rare disease portfolio Like Tavneos, Tepesa, Krystexxa and Uplizna fit this description perfectly and they will benefit from Amgen's decades of experience and inflammatory diseases. These medicines are also early enough in their life cycles that we can positively impact their growth by leveraging Amgen's With Amgen medicines now available in about 100 countries. And today, our rare disease sales come almost exclusively from the U.

Speaker 2

S. So we'll be able to leverage our global presence to quickly bring these medicines to patients around the world. You'll hear more in a minute from Karam Karnani, who joined us through the Horizon acquisition and is leading a newly created rare disease business that is now The 4th leg of Amgen's commercial stool alongside our inflammation, oncology and general medicine businesses. Turning to our financial performance in the quarter, total revenues were up 4% and earnings per share were up 6% compared with a year ago. Volume increased 11% globally, which represents our 4th consecutive quarter of double digit volume growth.

Speaker 2

And we achieved good balance across all of our geographic regions and therapeutic areas. 7 of our medicines generated record sales in the quarter And I'll highlight one of these, Glyncyto, which delivered 55% sales growth in the 3rd quarter. We see continued upside potential for Glyncyto as it is increasingly used in earlier lines of therapy and as practice guidelines are updated to reflect the role this medicine can play in treating a broad range of patients with acute lymphoblastic leukemia. Turning to our pipeline, we had the opportunity to discuss 6 potential 1st in class oncology assets with you recently following ESMO. 3 of these have earned breakthrough therapy designations from the FDA, tarlatanab, BLINCYTO and LUMICRAS in combination with Vectavix in colorectal cancer.

Speaker 2

We also continue to progress trials for bemirtuzumab in gastric cancer, for zaluritomig in prostate cancer And for AMG 193, our PRMT5 inhibitor, which has generated responses across 6 solid tumors. I'll just quickly note that AMG 193 was identified through our proprietary DNA encoded library technology, which we added through the 2019 acquisition of New Evolution and it demonstrates our leadership in the emerging field of multi specific drugs that can address pathways that have long been recognized, but considered inaccessible to traditional drug discovery efforts. In other pipeline news, we've completed enrollment In our Phase 2 obesity study for mira debarkcafraglutide, which is formerly known as AMG133. And finally, the FDA has accepted our BLA for a biosimilar to EYLEA. Looking at our business, We feel we have good momentum across the board.

Speaker 2

We have everything we need with the portfolio, the pipeline and the people to deliver attractive sales and earnings growth through the end of the decade and beyond. As always, I want to thank Amgen employees around the world, including some 2,000 new colleagues focused on rare diseases for their commitment to strong execution on behalf of the patients we serve. With that, I'll now turn over to Murdo Gordon. Meru?

Speaker 3

Thanks, Bob. I'm pleased with our performance in the Q3. Execution is strong across the business with record quarterly sales for 7 brands and robust volume growth across our general medicine, inflammation and hematology oncology portfolios. Product sales increased 5% year over year. Volume growth was 11% with strength across our regions.

Speaker 3

U. S. Volume growth was 11% and volume growth in our Europe, Latin America, Middle East and Canada region was 8%. Consistent with our international expansion strategy, Asia Pacific continues to be our fastest growing region with 27% volume growth in the quarter. Starting with our General Medicine business, which includes Repatha, Prolia, Evenity and Aimovig.

Speaker 3

Overall revenue for these 4 products grew 21% year over year in the 3rd quarter, driven by 20% volume growth. Repatha sales increased 31% year over year in the 3rd quarter with volume growth of 44%, partially offset by lower net selling price. In the U. S, volume growth of 45% was driven by a record number of new patients starting treatment, more than doubling year over year. We saw declining net selling prices in the U.

Speaker 3

S, primarily driven by new formulary coverage by CVS in July for commercial patients. Outside the U. S, we saw 43% volume growth with strength across our regions. There are still many more patients around the world who can benefit from Repatha, and we're rising to meet that challenge by investing and executing to drive awareness among In the U. S, we have significantly expanded our primary care sales force and activated more than 15,000 new prescribers this year.

Speaker 3

We're also increasing promotion to patients through direct to consumer media efforts. Transitioning to bone health. Prolia sales grew 14% year over year in Q3, primarily driven by 7% volume growth and higher net selling price. We expect volumes for Prolia to grow, supported by real world evidence data presented earlier this year that demonstrate Prolia's superiority in reducing fracture risk when compared to alendronate in treatment naive patients with postmenopausal osteoporosis. EVENITY had record sales of $307,000,000 for the quarter, driven by 48% volume growth.

Speaker 3

Osteoporosis disproportionately impacts postmenopausal women and the diagnosis and treatment rates for these patients are low. In 2023, we expect approximately 3,000,000 patients in the U. S. Will be treated for postmenopausal osteoporosis. An estimated 40% of treated patients will be at very high risk of fracture, but only 6% of those high risk patients will be treated with a bone building product.

Speaker 3

EVENITY plays an important role in the bone builder market with a 58% share in the U. S. And a 44% share in Japan. There's much more work to be done and we'll continue to invest to ensure EVENITY reaches the patients who need it. Otezla sales declined 10% year over year, driven by lower net selling price, unfavorable changes to estimated sales deductions And lower inventory levels, partially offset by 1% volume growth in the U.

Speaker 3

S. Otezla net price declines were driven by higher rebates We have strong conviction in the growth potential of Otezla. With this unique indication for all severities of psoriasis combined with an established clinical profile, broad payer coverage, a lack of testing required for initiation and convenient oral administration. To realize that potential, we have increased our investment to ensure physician and patients understand both the importance of treating psoriasis systemically and the safety and efficacy profile that Otezla offers. We're already seeing positive results from that increased investment, Including significant growth in the number of patients requesting educational information and taking action on the Otezla website that generally indicate Preparation for discussion with a healthcare professional.

Speaker 3

We've also recently increased our dermatology sales force by 20% to educate physicians about the benefits of OTEZLA for appropriate patients. With these increased investments, we expect to drive a return to growth for Otezla. Enbrel sales decreased 6% year over year, primarily driven by an 8% decline from unfavorable changes to estimated sales deductions. Year over year volume increased 1% in the 3rd quarter and the number of new patients in the U. S.

Speaker 3

Starting treatment increased by 22%, driven by improved payer coverage and Enbrel's 20 plus year track record of safety and efficacy. For the remainder of 2023, we expect our improved coverage will lead to continued growth in new patients and declining net selling price. Test Buyer continues to show strong growth with $161,000,000 in sales in the 3rd quarter. Sales increased 21% which was approved by the U. S.

Speaker 3

Food and Drug Administration in the Q1. We've now obtained coverage of the PEN with the majority of pharmacy benefit managers, Enabling easy access and convenient self administration for patients in the U. S. With severe uncontrolled asthma. As we expected, TESBIR has both penetrated and helped grow the U.

Speaker 3

S. Asthma biologics market. In 2023, the number of new patients on Asthma Biologics has increased by over 20% year over year and Testfire's share of this expanded market is approximately 20%. Sales of TAVNEOS were $37,000,000 in the quarter with 26 percent quarter over quarter volume growth. In the U.

Speaker 3

S, approximately 2,300 patients have now been treated with TAVNEOS by over 1500 healthcare professionals. We continue to see an increase in awareness of TAVNEOS by rheumatologists and nephrologists. Exiting the quarter, we saw an increase in new patient start forms. Looking forward, we expect to bring TAVNEOS to even more patients with ANCA Associated Vasculitis. AMGEVITA sales increased 30% year over year for the 3rd quarter, driven by 53% volume growth, partially offset by lower net selling price.

Speaker 3

Ex U. S. Sales increased 10%, driven by 22% volume growth, partially offset by lower net selling price. Moving to our hematology oncology business, which includes lumacraz, Kyprolis, XGEVA, Vectabix, Nplate and BLINCYTO. Strong commercial execution and compelling new clinical data drove 15% volume growth year over year for these 6 innovative products.

Speaker 3

BLINCYTO sales grew 55% year over year to a record $220,000,000 for the 3rd quarter. Volume growth of 56% was supported by broad prescribing to acute lymphoblastic leukemia patients Following positive data from the registration enabling E1910 study presented late 2022 and updated NCCN guidelines that were issued in May. Long term, we see significant additional growth potential for BLINCYTO from earlier lines of therapy. LumaCraz reported $52,000,000 in sales for the 3rd quarter, A decline of 31% year over year. Dollars 22,000,000 of this decline was driven by ongoing reimbursement negotiations in France.

Speaker 3

We see future growth opportunities for lumikeraz driven by launches in new markets and our comprehensive global clinical development program. Fectabix sales increased 2% year over year for the Q3 to a record $252,000,000 driven by higher net selling price and 4% volume growth, partially offset by unfavorable foreign exchange impact. Kyprolis grew 10% year over year, primarily driven by 8% volume growth. And Enplate sales increased 45% year over year for the 3rd quarter, resulting from $142,000,000 order from the U. S.

Speaker 3

Government. In the 4th quarter, we expect to fulfill an additional $62,000,000 order for Enplate by the U. S. Government. Given the strong performance of our hematology oncology products and the Citing new positive data presented at ESMO on our oncology pipeline, we look forward to helping more patients with their cancer therapy.

Speaker 3

Overall, our execution is strong across the business, driving growth and demonstrating our dedication to serving patients. And with the expansion of our rare disease portfolio, we're excited to serve many more patients around the world who can benefit from our therapies. And with that, I'll turn it over to Vikram.

Speaker 4

Thanks, Murdo. We're excited to bring together Horizon's Medicines' Pipeline and rare disease expertise with Amgen's history of leadership in inflammatory diseases, global infrastructure and world class biologic capabilities. For those that are not as familiar with Horizon's portfolio, I will spend the next few minutes providing some background on our rare disease medicines. Horizon's business delivered $945,000,000 of sales in the 3rd quarter, representing 2% year over year sales growth with multiple positive leading indicators. Let me describe in more detail.

Speaker 4

TAPANZA, the 1st and only medicine approved for the treatment of thyroid eye disease regardless of disease activity or duration, Generated $453,000,000 of sales in the 3rd quarter, representing 2% quarter over quarter growth. We are confident that now as we have officially joined forces and have onboarded the full commercial team, We will make significant progress in advancing this important product over time to patients. We are driving several initiatives to continue to build the U. S. Thyroid eye disease market.

Speaker 4

In the Q3, we saw a greater than 50% year over year increase In the number of Tepesa prescribers, supported by the April 2023 FDA label update to treat patients with thyroid eye disease regardless of disease activity or duration. We are pleased with this progress and are continuing to educate the physician community on new clinical data an updated indication across the full spectrum of TED patients. 2nd, large national and regional payers Are continuing to make favorable policy changes to help eligible patients access Tepesa. To date, we have obtained favorable policy changes for greater than 30% of U. S.

Speaker 4

Covered lives, which are expected to take effect later this year early next year. As a reminder for TEPEZZA, there's a time lag between a patient being identified for TEPEZZA treatment and treatment being initiated. It can take up to 90 days for a patient enrollment form to move through the prior authorization process. Once that step is complete, then the patient's infusion needs to be scheduled at an appropriate site of care. This process takes time and we have taken several important steps to minimize the time between patient identification and treatment initiation.

Speaker 4

Finally, we continue to see approximately 100,000 patients with moderate to severe disease in the U. S. That are appropriate for TAPAZA, with the majority of these patients in low clinical activity score settings. Therefore, the patients the FDA's label update, Combined with favorable medical policy changes by payers and supported by the expanding base of prescribing physicians gives us a significant opportunity to reach more patients. These positive execution trends underpin our confidence in Tepeso's growth potential in the U.

Speaker 4

S. Moving on to markets outside the U. S, We continue to see international expansion as a meaningful long term growth opportunity for Tepesa, which received its first ex U. S. Approval in Brazil in the Q2 of this year.

Speaker 4

We are particularly excited about the opportunity To leverage Amgen's long standing presence in multiple major ex U. S. Markets, including Europe and in Japan, where we have reported positive data from the Phase 3 OPTIC J trial. We also continue to enroll a TEPEZZA Phase 3 trial in Japanese patients with chronic or low clinical activity thyroid eye disease. KRYSTEXXA, The first and only medicine approved for uncontrolled gout delivered a record $253,000,000 of sales in the 3rd quarter, representing 32% year over year growth.

Speaker 4

Sales are now annualizing at a $1,000,000,000 run rate. Performance in the Q3 reflected continued strong uptake in both the rheumatology and nephrology segments. Strong results were driven by execution across all phases of the patient journey, demand generation, stakeholder education and adherence to treatment. The FDA approved KRYSTEXXA's label change for combination with methotrexate in July 2022. We have seen a steady increase in uptake since then.

Speaker 4

Immunomodulation usage remained above 70% of new patient starts in the 3rd quarter. We see an opportunity to redefine klstexxa with methotrexate as a standard of care and reach even more of the over 100,000 Uncontrolled gout patients in the U. S. Aplisna sales increased 54% year over year In the Q3 to $67,000,000 International expansion is also underway with aplizna now launched in multiple ex U. S.

Speaker 4

Markets including Germany, France, Italy, Spain and Brazil. Additional indications and development also support Aplisna's long term growth potential With Phase 3 trials underway in both IgG4 related disease and myasthenia gravis. The rest of Horizon's portfolio Generated $173,000,000 of sales in the 3rd quarter, primarily driven by our portfolio of ultra rare medicines, RAVICTI, PROCYSBI and ATAMUNE, we see an opportunity for this basket of products to continue to generate robust sales. Before I turn it over to Dave Reese, I want to take the opportunity to thank all my colleagues in the rare disease business for maintaining their focus on patients throughout a period of distraction over the last several months. Looking ahead, we are excited to work together by leveraging Amgen and Horizon's combined capabilities to ensure our medicines reach more patients even faster who are suffering from serious and rare diseases globally.

Speaker 4

I'll now turn it over to Dave.

Speaker 5

Thank you, Vikram, and good morning, everyone. I'd like to begin by welcoming our new colleagues from Horizon. We're excited to be integrating Horizon's R and D capabilities with Amgen to advance the promising Horizon pipeline. For R and D, the Q3 was one of high quality execution as we progressed our innovative pipeline with important oncology data readouts, The addition of 2 breakthrough therapy designations and completion of enrollment on key studies. We also advanced our innovative pipeline through rapid enrollment on multiple registration enabling studies.

Speaker 5

Starting with general medicine, we have completed enrollment in the Phase 2 study of mirinibartcafraglutide in patients with obesity with or without diabetes. The goal of this study is to generate data that will provide optionality To design a broad Phase 3 program, leveraging the unique properties of miridovartcafraglutide that could potentially allow us to take a differentiated approach. We anticipate top line data from this 52 week study towards the end of 2024. The Phase 3 outcome study of opaciran, our potentially best in class Lp targeting small interfering RNA molecule An atherosclerotic cardiovascular disease is enrolling very well. In inflammation, beyond severe asthma, We are investigating additional indications with TESBIR, including separate Phase 3 studies in chronic rhinosinusitis with nasal polyps, which is fully enrolled and eosinophilic esophagitis.

Speaker 5

We also have a Phase 2 study in COPD that has been fully enrolled with top line data anticipated in the first half of twenty twenty four. This study has recruited a broad population of COPD patients, including patients with both high and low eosinophil counts. Orocatinlimab, a first in class anti OX40 monoclonal antibody Being investigated in patients with moderate to severe atopic dermatitis, recruitment is off to a strong start On the ROCCAT Phase 3 clinical development program, we have now randomized over 1500 patients across the program. We are excited to present additional data from our expanded rheumatology portfolio following the acquisition of Horizon, Including data from a Phase 2 study of desidalabap and Sjogren syndrome along with data from KRYSTEXXA, Tavneos, Otezla and other molecules from our broad portfolio at the American College of Rheumatology Convergence 2023 meeting in November. I'll be brief with my remarks on our oncology portfolio given the detailed oncology review last week.

Speaker 5

Based on the E1910 Phase 3 study, the FDA has granted BLINCYTO breakthrough therapy designation For the treatment of adult and pediatric patients with CD19 positive Philadelphia chromosome negative B cell precursor from advancements into earlier lines of therapy and subcutaneous administration. BLINCYTO also serves as a blueprint Along with experts in the field, we are very encouraged by tarlatanab, our BiTE molecule targeting DLL3. At ESMO, we presented data from Delphi-three zero one, a Phase 2 study in late stage small cell lung cancer, where we saw impressive response rates, Durability of response and overall survival in a setting where patients typically have limited options and a very poor prognosis. We are submitting these data to the FDA and are pleased that the FDA has granted tarlatanab breakthrough therapy designation Given our confidence in these data, we are rapidly advancing tarlatanab into earlier lines of treatment with multiple Phase 3 studies underway or planned. Based on emerging clinical data, we are discontinuing PSMA targeting bispecific AMG 340 And we'll focus our efforts on rapidly advancing valuritamig in metastatic castrate resistant prostate cancer.

Speaker 5

We expect thaluritamib dose expansion cohorts to be fully enrolled by the end of the year and are planning to initiate additional studies in patients with earlier stage prostate cancer. With AMG 193, a small molecule MTA cooperative PRMT5 inhibitor, We're encouraged by the responses we've seen across 6 MTAP null solid tumors, the manageable safety profile and preclinical evidence of CNS penetrance. We're now rapidly enrolling dose expansion cohorts. And with that, I'll turn things over to Peter for the financial update.

Speaker 6

Thank you, Dave. I'll review our Q3 results before discussing our updated 2023 guidance. Turning to our Q3 financial results, which are shown on Slide 44. Total revenues of $6,900,000,000 grew 4% year over year and non GAAP earnings per share of $4.96 Grew 6% year over year. The growth in revenues was due to product sales increasing 5% year over year driven by 11% volume growth.

Speaker 6

3rd quarter total non GAAP operating expenses increased 4% year over year. We advanced our pipeline and invested in growth opportunities in the quarter, While delivering a non GAAP operating margin as a percent of product sales of 52%. Non GAAP Cost of sales as a percent of product sales increased 1.3 percentage points on a year over year basis to 17.4%, primarily driven by higher profit shares and changes in product mix. Non GAAP R and D expenses in the quarter decreased 2% year over year Due to lower spend in research and early pipeline activities, partially offset by higher spend in later stage clinical programs and marketed products, Year to date non GAAP R and D expenses increased 5% due to higher spend in later stage clinical programs and marketed products, partially offset by lower spend in research and early pipeline. Non GAAP SG and A expenses in the 3rd quarter increased 1% year over year, we continue to focus on prioritizing key investments, digitalization, Driving productivity and accelerating use cases for artificial intelligence.

Speaker 6

Non GAAP OI and E We're a net $225,000,000 expense in the 3rd quarter. The year over year favorability was driven primarily by higher interest income and the change in Beijing accounting from equity method to mark to market investments with the impact included only in our GAAP results. Our 3rd quarter non GAAP tax rate increased 3.2 percentage points to 16.1%, primarily due to the 2022 Puerto Rico tax law change that replaced the excise tax with an income tax beginning in 2023. We continue to execute on our capital allocation priorities. 1st, we continue to prioritize investments in both internal and In the Q3, we increased investments in programs, including maridibit, cafraglutide, I'll call it Mari from now on roketinlimab, TAVNEOS and ABP-two zero six Our biosimilar to Opdivo.

Speaker 6

2nd, we continue investing in our business for long term growth, including through simultaneous construction Our state of the art manufacturing facilities in Ohio and North Carolina. We're excited for the anticipated licensure of our Ohio facility in the first half 2024, additionally, we're making investments in all parts of our business to leverage the power of generative AI opportunities. 3rd, we have a strong track record of returning capital to our shareholders and paid dividends of $2.13 per share in the 3rd quarter, representing a 10% increase over the Q3 in 2022. The company generated $2,500,000,000 of free cash flow In the Q3 of 2023 compared with $2,800,000,000 in the Q3 of 2022, we will continue to generate strong cash flows. However, Q4 cash flow will be lower than historical patterns due to the timing of tax payments and Horizon transaction related expenses.

Speaker 6

Turning to the outlook for the business for 2023 on Slide 46. We're pleased to have closed the acquisition of Horizon 2023, so our Q4 results will exclude approximately 1 week of Horizon's results. We are raising our 2023 revenue guidance to $28,000,000,000 to $28,400,000,000 versus previous guidance of $26,600,000,000 to $27,400,000,000 For 2023 non GAAP earnings per share, We are narrowing the range to $18.20 to $18.80 versus previous guidance of 17 We will add Horizon's business into Q4 without material non GAAP EPS dilution. However, we do expect Q4 non GAAP EPS to be lower than Q3 non GAAP EPS because of planned investment increases in our business, Including key assets in our innovative pipeline, beginning with Mari, Opaciran and AMG 193 and other strategic business investments including generative AI use cases in all parts of our business. This sequential pattern is consistent with historical trends.

Speaker 6

And in addition, Q4 non GAAP EPS will begin to include the recognition of interest related to the Horizon financing as a non GAAP expense. Important additional points to consider as you model the remainder of 2023. We now expect other revenue for 2023 to be in the range of $1,200,000,000 to $1,300,000,000 versus our prior range of $1,100,000,000 to $1,300,000,000 With the Horizon acquisition, we now anticipate full year non GAAP operating expense For 2023 to increase from our previous estimate of 3% to approximately 10% versus last year, Horizon represents approximately 5 percentage points of this 10% year over year increase. We continue to expect the full year 2023 operating margin as a percentage of product sales to be roughly 50%. We continue to expect non GAAP cost of sales as a percentage of product sales to be between 16% 17%.

Speaker 6

We now expect our non GAAP R and D expenses to increase from our prior guidance of 5% to about 10% year over year. Verizon represents approximately 3 percentage points of this 10% year over year increase. The additional 2 percentage points are driven by planned increase in our investments in our innovative pipeline, including Mario Passran and AMG 193. We continue to expect non GAAP SG and A to be down year over year as a percentage of product sales, slightly. We now expect non GAAP OI and E expenses to be in the range of $1,400,000,000 to $1,500,000,000 up from our prior guidance of $1,100,000,000 to 1,200,000,000 We expect Q4 OI and E to be about $700,000,000 reflecting interest expense related to the Horizon financing, which will be included in our non GAAP results effective October 6.

Speaker 6

And as you begin to model 2024, note that we expect 2024 OI and E to be consistent with this Q4 run rate. This higher interest expense is driven by the $28,000,000,000 of debt raised for the Horizon acquisition at a weighted average interest rate of 5.6%. We expect to end 2023 with approximately $65,000,000,000 of long term debt, including the current portion of it and $11,000,000,000 of cash and cash equivalents. For the full year, we anticipate a non GAAP tax rate of 16.5% to 17%, down from prior guidance of 17.5% to 18.5%. We expect approximately 5 and the Amgen Equity Awards.

Speaker 6

Our 2023 capital expenditures are now projected to be approximately 950,000,000 up from our prior guidance of $925,000,000 The addition of Horizon's rare disease team further strengthens our confidence in delivering Against our long term growth objectives, we continue to allocate capital to advance innovation at speed and at scale. And I'm incredibly grateful to our now 26,000 plus colleagues for successfully executing our mission of serving patients. This concludes the financial update. And now I will ask our operator, Julianne, please open the lines for

Operator

Thank you. Our first question comes from Michael Yee from Jefferies. Please go ahead. Your line is open.

Speaker 7

Hey guys, good morning. Thanks for all the details around the Horizon transaction. I just wanted to ask a question to David Reiss. I mean, David, unless we're hiding under a rock, I guess, obesity is like the biggest thing ever now and wanted to understand your Commentary and confidence around 133 and the profile around what you think that could be relative to leaders And how 786 would fit into that given such a high bar for other orals? Thank you.

Speaker 5

Yes, sure. As we've discussed before, Mike, with 133, we believe we have a potentially differentiated product Based on the mechanism of action, it's bifunctional to remind everyone that antagonizes Gipper based on Genetic evidence largely compiled by us with 2 GLP-one peptide stapled to the molecule for that mechanism of action. As I noted in the remarks, we've rapidly enrolled the Phase 2 trial. There are multiple arms To this trial that explore 3 different doses as well as different dosing intervals that I think will give us broad optionality Going forward, we were quite pleased with the Phase 1 data in terms of depth of response, the kinetics response as well as persistence and these are the things that we will be looking at in Phase 2 as we go forward. So it's full steam ahead On this program and we're looking forward to data from the Phase II trial next year, which will really inform the breadth Of the Phase 3 trial that we're contemplating, which could be quite large.

Speaker 5

In terms of AMG 186 or 786, this is Yes, an orthogonal mechanism of action. We're bringing in data and as we've indicated through the first half of next year or so, we anticipate Presenting those data and determining the path forward. As you note, it's a high bar in this field and we'd have to see the sort of profile That would give us the confidence to invest broadly in molecule like that. I would also note we've got a suite of preclinical molecules, many of them non incretin based in terms of mechanisms of That we'll be bringing forward over the next few years. So this is an area where we expect it to be a long term player.

Speaker 5

Thanks.

Operator

Thank you, Michael. Our next question comes from Yaron Werber from Cowen. Please go ahead. Your line is open.

Speaker 8

Great. Thanks for taking my question. Peter, just for you, the $700,000,000 run rate, that was interest expense only, right? That's not including Where you're recording sort of the Beijing contribution in the line right above it in terms of other income? And then just secondly again on your guidance, you You mentioned 3% to 10% increase year over year and you mentioned 5% to 10% going to R and D.

Speaker 8

The 3% to 10% increase, Just remind us what that was? Because SG and A is expected to be down, right, slightly year over year, so I just missed what that was.

Speaker 6

Right. Thank you, Yaron. The $700,000,000 is everything. So that's the full run rate. And on the your question on R and D, as I said in my remarks, we've focused our spending on the Later clinical and end market portfolio that was slightly offset by some decreases in early research.

Speaker 6

But We continue to spend and invest in the business and we'll continue to do that. As you can see, we're fortunate to have a Significant number of opportunities in Phase 3 in the later stages. So that's what we'll stay focused on. We'll continue to differentially invest in The opportunities and innovation and we're very excited about

Operator

that. Thank you, Yaron. Our next question comes from Terence Flynn from Morgan Stanley. Please go ahead. Your line is open.

Speaker 9

Great. Thanks for taking the question. Maybe a Two parter for me for Peter as well. Peter, again, I know you ran through a lot of numbers there at the end. But in terms of the revenue guidance raised for the year, Can you just characterize if that was all coming from the Horizon portfolio or if there was any other contribution from the And then the second part of the question is just any directional help with how to think about 2024 tax rate.

Speaker 9

As I know, There's a number of moving pieces from some legislation, but then you obviously have the Horizon deal closed. So just directionally, can you help us out on 2024 tax rate? Thank you.

Speaker 6

Yes. So, excuse me, on the tax rate, let me start with that 2024 tax rate, we'll guide on that as we always do at the beginning of the year. I would just say, I think you're Thinking about the global minimum tax in Pillar 2, and I would just note there's no consensus or predictability about how that whole OECD The framework is going to be implemented. I know different countries are doing different situations. Rest assured, we look at everything, Optimize our position as appropriate on something like that.

Speaker 6

So we'll give you guidance on that next year at the beginning of the year. First part of the question?

Speaker 10

Revenue matters.

Speaker 6

Yes. On revenue, look, we don't really break that down. I would just suggest that we continue to see strength in the business And we continue to see our in line portfolio perform very, very well. I would just note we had 7 products with record sales in the quarter. We had Repatha up 31% up in the quarter year over year and we Continue to see the hematology oncology portfolio was up 16%.

Speaker 6

So everything is strong in our base business. We're excited about that base business. It It performed really well and we're very excited to have the rare disease business now. And looking forward to having that As we said, it's kind of the force tool of our commercial thrust forward. So we're Seeing good strength around the business in different areas and we'll just continue to get more and more medicines to patients.

Speaker 6

I'd note the 11% volume growth is really important underneath that 12% volume growth outside the United States and underneath that 27% volume growth in JAPAC, Our fastest growing region. So that's how we're looking at that. We're pleased with the momentum and we're pleased to be able to raise the 28.0 to 28.4.

Operator

Thank you, Terrence. Our next question comes from Salveen Richter from Goldman Sachs. Please go ahead. Your line is open.

Speaker 11

Good morning. Thanks for taking my question. With regard to the Horizon transaction now that it's closed, could you just walk through The outlook for Tepesa and the other assets as we look to 2024 here, you talked about initiatives that you have to And the patient population and ex U. S. Being a growth lever, just maybe walk us through that and when we might get updated long term guidance, including Horizon?

Speaker 11

Thank you.

Speaker 2

Yes. Maybe we'll take this in 2 parts, Salveen. It's Bob. Obviously, we're not going to provide 'twenty four guidance here this morning, but We'll see whether we can give you a clear sense of the things that are exciting us when we look at those products for heading into next year. And just generally on the question of long term guidance, As you heard us say on a number of occasions, we remain confident that we're on track to meet or beat the objectives that we established for 2,030.

Speaker 2

In some ways now, frankly, we're more focused on what we can deliver through 2,031 and soon to be 2,032 as well. So We reviewed in-depth review of the oncology portfolio a couple of weeks ago and gave you a good sense for the moving pieces through the end of the decade and we may Seek to present a picture of the business in that way now heading into next year so that you can get a more comprehensive deep dive into the different Segments of the business that are driving growth. But let's turn to your first question, which is the outlook Horizon and the initiatives that are underway in particular with respect to Topezna and Vistexxa and Upluzna. So Vikram, why don't

Speaker 4

you fire away? Yes. Thanks for the question. I think as I said in my prepared remarks, we have a lot of positive Leading indicators as we look at the business. I'll start with Tepesa.

Speaker 4

We're continuing to build that US TED market Following the FDA's April 2023 label update and that really helps us get the medicine to TED patients regardless of disease activity or duration. And what we've seen following that label update is That the payers are continuing to update their medical policies and make them more favorable so that more of these patients More in the low CAS setting or the low clinical activity score setting can now access Tepesa. And I think finally from an execution standpoint, We see newer prescribers from both ophthalmologists as well as endocrinologists increasing 50% year over year in this Q3. So All of these indicators for Tepesa are positive and we feel good about the execution of the team. And As I said, we have now combined forces with Amgen and together we should be able to drive business in a positive way moving forward.

Speaker 4

I think talking about the story around TEPEZZA also is one of international growth. While we see a lot of positive trends in the U. S, pretty excited about what we can do as a combined company for patients outside the U. S. As well.

Speaker 4

We've talked about Brazil getting approval recently. We've got chronic or optic J as our trial in Japan. We've talked about a chronic trial that's enrolling. And finally, we're getting ready for other markets and we hope to bring the medicine to many more markets now as part of the combined company That we were talking about previously. So, TEPEZZA both signs very positive in the U.

Speaker 4

S. As well as globally. And as we've talked about the results for KRYSTEXXA and ABLISNA, both those medicines performed really, really well. We have Immunomodulation with KRYSTEXXA being a major driver since the label update last year. That has continued to drive uptake Since that time, we see that continuing into the future.

Speaker 4

And with the Plisna, it's the fastest growing biologic in neuromyelitis Optica Spectrum Disorders or NMOSD and we see that momentum continue both in the U. S. As well as outside the U. S. So I think when I look at the overall portfolio, we have we're operating from a position of strength and now we can expand that even further with the combination Thank you, Vikram.

Operator

Thank you, Salveen. Our next question comes from Jay Olson from Oppenheimer. Please go ahead. Your line

Speaker 7

is open. Hey, congrats on

Speaker 12

all the progress on so many fronts. Can you talk about your Investments in AI technology and how that may influence your drug discovery and development over the next 5 to 10 years? Thank you.

Speaker 2

Sure. I'll ask Dave Reese to address that, Jay.

Speaker 5

Yes. Thanks, Jay. This is an area where we're very excited. I like to characterize it as a hinge moment where we're seeing the coming together or the unification of Technology and Biotechnology, I really think this is going to effect over time a qualitative Change in how we do drug discovery and drug development. So everything from protein structure prediction, protein protein interaction, Prediction at the molecular level to multi omic analysis on extraordinarily large data sets, Which is only tractable through AI or machine learning, dense clinical trials data and then real world In real world data, when you look across that spectrum, I believe we probably have the largest data sets in the industry.

Speaker 5

And so we are putting the Tools in place and the foundational models to really mine those data for deeper insights into biology And then all the way out into the market. We'll talk about this more over time, but this is going to be an area of investment and It can be overhyped. It's not a panacea, but it is absolutely going to be the most powerful tool we have seen in a long, long time.

Operator

Thank you, Jay. Our next question comes from Umer Raffat from Evercore ISI. Please go ahead. Your line is open.

Speaker 3

Hi, Dave, I have a 2 part question on AMG 786, the oral for obesity. First, I noticed you guys dropped a cohort in your SAD portion of the trial. Is that because you ran into MTB? And then also I noticed the Exclusion criteria around suicide ideation were intensified, and I can't tell if we could be reading into that or not. Would love to get any color.

Speaker 3

Thank you.

Speaker 5

Yes, thanks. And on the latter, I wouldn't overthink that at all. I don't think there's anything there. In terms of the dosing that we do, this is always adjusted as we move through Phase 1 trials, as I indicated, we're bringing in the data now. We're taking a look at that And the constellation of clinical data, updated preclinical data, and I think we'll have that all together as we go into And that will determine the potential path forward for AMG 786.

Speaker 5

And just to remind everyone, this is A target that is not an incretin based target.

Operator

Thank you, Umer. Our next question comes from Robyn Karnauskas from Truist Securities. Please go ahead. Your line is open.

Speaker 13

Hi.

Speaker 14

Thanks for taking my question. I do have a follow-up to Sabine's question actually. So TESPIR has not gotten a lot of market There's so much room to grow in the TED space. Can you walk me through like how Amgen can actually help grow that business? I'm confused by whether it's the hearing loss or reimbursement or what are really the levers that will actually grow that company grow that business Tepesza, sorry, Tepesza.

Speaker 14

But I think that there's a lot of room to grow and given your strength, you could probably make that work. So How do you intend to do that?

Speaker 2

Okay. Thank you, Robin. So I think it's a 2 part question there on TEPEZ. So we may That was in 2 parts, the combination of Vikram and Murdo. So go ahead, Vikram, why don't you start?

Speaker 4

Yes. Thanks for the question. As I said earlier, I think one of the areas that has something that happened this year was the FDA update. Now when the label updates to patients that are treated regardless of disease activity or duration, Many of these patients, if I would say more of these patients are being treated by prescribers such as endocrinologists And ophthalmologists. And that's what the team has been focused on working through making sure that our educational programs available to these physicians So that we can widen our prescriber base from the original set of prescribers that started treating patients at launch.

Speaker 4

So It's really important to understand that expanding the prescriber base is a critical driver for that success going forward. And as we've seen, New prescribers have increased 50% year over year. As we continue to work through these Low cast or low clinical activity patients, we also have to remember that when they are prescribed the medicine, Payers need to open up access to the medicine. So our market access team has been working pretty diligently To make sure that payers continue to update their medical policies and what we have seen is more than 30% of U. S.

Speaker 4

Covered lives Are now eligible patients that can access Tepesa with more open or more favorable policies. This has to continue and both of these are areas that we will continue to work on as we go into Early next year and beyond. And maybe I'll turn it over to Murdo to add his comments as well.

Speaker 3

Yes. Thanks, Vikram. Hi, Robin. I would add, much the same way when we acquired ChemoCentryx and TAVNEOS, We realized that there was a low level of awareness of TAVNEOS. Now what we did there was we Added reminder messaging to some of our broader rheumatology covered sales forces to increase awareness Of the data associated with TAVNEOS and ANCA associated vasculitis patients, we've seen a corresponding increase in utilization, of course, driven by Awareness of that product.

Speaker 3

So the core team is still promoting the attributes of the product and educating physicians, but there's a broader group of field personnel building general awareness of that product. What I think Vikram and I are talking about Is the Amgen teams that cover endocrinologists who are involved in the diagnosing and treatment of thyroid eye disease Would be an ideal opportunity for us to broaden awareness amongst that community of endocrinologists diagnosing and treating thyroid eye disease today to augment the great work that is happening with the rare disease teams Under Vikram's leadership. So there's a number of things like that where we can scale and speed up The building of awareness, for example, of the new data that Vikram was just describing and the broadening of the label language. Vikram also mentioned the international expansion. The original plan was quite ambitious For Horizon, we've actually increased the number of markets that we intend to file and launch in, In a shorter period of time, so that would be an additional opportunity for growth, given the strength of the 2 companies now combined.

Speaker 2

I might just add also Robin that in terms of the time course of events here, I think now that we Fleck back on a year of ownership of ChemoCentryx, we can really start to see the benefit of what Murdo just described kicking in Over the last few weeks months. So it takes a little bit of while, but I think our confidence is that over that period of time we have been able to find The ways that we can add distinctive value to that product and we are hoping this similar thing will happen with respect to the new rare disease molecules that we brought on board. So I like walk ins, flip a light switch and suddenly things are performing on a different track, but rather come in, work together, identify the ways in which we can The additive in the marketplace and I'm hopeful that we'll see during the course of 'twenty four the momentum build for the combined organization on these products.

Operator

Thank you, Robin. Our next question comes from David Risinger from Leerink Partners. Please go ahead. Your line is open.

Speaker 15

Yes. Thanks very much. So my question is on oral obesity development. Regarding Phase 1 candidate 786, management has consistently emphasized that it also has a suite of oral preclinical products. And so Should we take away that we should be viewing 786 as more of a wildcard rather than something that Amgen has conviction in at this point?

Speaker 15

And when do you expect to be able to start Phase 1 for another oral preclinical candidate? Might that happen in 2024 or not until 2025? And then separately, just I wanted to squeeze in a quick financial question. Do you expect Horizon product channel inventory worked down in the 4th quarter to significantly constrain reported net Horizon sales in the 4th quarter. Thank you.

Speaker 5

Yes. Thanks, Dave. And Dave Reese, I'll start and then turn things over to Murdo and Vikram. In terms of oral obesity molecule 786 as I've said it has a novel mechanism of action it's a Phase 1 molecule so you should View it as a Phase 1 molecule and we're bringing in as the data I said and we'll take a look at that as we get into the new year And make a determination on potential path forward for that molecule. I wouldn't view it as anything more or less than a Phase 1 Asset with a novel mechanism of action.

Speaker 5

In terms of additional molecules and when we might file INDs and launch 1st in human trials, we'll give guidance as that portfolio advances over time. Again, many of those molecules are targets that We emanated from Tecogenetics, our colleagues in Iceland, and I'll provide further information as we get ready To move towards the clinic, but this is playing the long game. If you step back, look, this field is in its infancy. We are just beginning to understand the complex metabolic arrangements that occur with obesity and there are clearly different forms of obesity. There's a lot of work to do.

Speaker 5

And as I've indicated, our intent here is to play the long game given that this is one of the major public health challenges of the 21st century. So let me now hand it over to Vikram and Murdo for additional commentary on your second question.

Speaker 4

Yes, David, I just want to make sure that I heard your question right. It was about inventory and product wind down. Look, I don't think we're going to comment on that Specific aspect, I think the our team remains focused on driving demand and working with physicians to educate them And expanding the use of TBEZLA for appropriate patients and that's where we're really focused to as our primary driver of net sales growth.

Operator

Thank you, David. Our next question comes from Chris Raymond from Piper Sandler. Please go ahead. Your line is open.

Speaker 16

Hey, thanks for taking the question. I just maybe a commercial question on your dermatology strategy. And specifically on Otezla, just on the dynamic that you guys talked about with free competitor drug, presumably that's sort of TIK2 Scenario, I think I heard you guys, you've been calling this issue out for some time, but also with the investment that you're making in sales force, I think I heard you say today that you're increasing that sales force sort of 20% or so. Is the implication That once the competitor free drug program runs its course that Otezla volume should increase? Or what's your sense of what happens to volume?

Speaker 16

And maybe I'll ask it another way. If that volume increase doesn't materialize, do you need additional derm portfolio offerings to support that added effort? Thanks.

Speaker 3

Thanks for the question, Chris. It's Mordo. So let's just recapitulate what's happening in this market. At the beginning of the year, you had a number of new launches, not just OTEC II with novel topicals coming into the market As well as a novel oral and every one of those products had very generous free drug programs and That had two effects on Otezla. There were topical patients who would have normally moved to their 1st systemic option Who tried the new topical treatments on a free drug basis.

Speaker 3

And at the same time, there was a launch of a new oral That had a very generous free drug program. And so Otezla, which sources the majority of its growth From topical patients versus systemic, in other words, biologic naive patients, Otezla got squeezed in the first and second On the basis of those new programs coming into the market, what we've seen since those two events in the market Is that the novel topicals have flattened out in their growth and have pulled back to some extent on their free drug offering. The other oral therapy, Syntyc2, continues to provide free drug and so continues to have some effect on Otezla. What we think will happen and we're already seeing the very early signals of this is that we will continue to source Our new growth from the topical patients, bionaive patients, given that Otezla is the ideal for systemic agent, We have established ourselves with really strong access in the market. So we don't need to provide free drug programs to the extent that everybody else is.

Speaker 3

And then as the contracting cycle for 2024 matures and we see what the actual access is For some of the other competitors in market, including the new oral, we should be able to give better guidance on our growth prospects The future, but we almost certainly expect the impact of the free goods program to continue to reduce And that will help us grow Otezla. The investments we've made are really just kicking in this quarter. So The expansion in the field force in your number was right by 20%. The Durham team was just deployed at the beginning of Q4. So they are only in field as of a 2 weeks.

Speaker 3

So that impact is not in the historical performance of the brand. And our direct to consumer spend has been increased for the Q4 as well. So We'll be able to tell you more as we go forward, but we feel given the very large number of patients here who continue to persist on topicals when they really are That's our candidates for systemic agents. We'll convert to Otezla as we build into that market. And just a reminder, we're the only product in the market that has A broad label regardless of severity of psoriasis.

Speaker 3

So we're optimistic and We're enthusiastic and that's why we've made these investments and we'll continue to look to add to our dermatology portfolio as we go forward.

Operator

Chris, our next question comes from Mohit Bansal from Wells Fargo. Please go ahead. Your line is open.

Speaker 10

Great. Thank you very much for taking my question and thank you for changing the time to make sure people can enjoy Halloween. So maybe one question on sequential growth. If I look

Speaker 2

at

Speaker 10

2nd quarter from 3rd quarter, it seems like pretty much every product even including and related accounts for the government Ajay, it seems to be down. I know that you warned about this in the Q2 call regarding Medicare Donut Hole, but Can you talk a little bit about the dynamics there and how should we be thinking about this going forward?

Speaker 3

Yes. Mohit, I don't think every product is down. I think we had a number of products posting pretty significant double digit growth in the quarter And those are products that we continue to expect long term growth from products like Repatha, EVENITY, Prolia, Our HemOn portfolio, Blincyco in particular. So we're seeing some strength in our priority growth brands That we expect to continue to drive. What we did have in the quarter were a number of Adjustments from prior period on net sales.

Speaker 3

So there was one particular adjustment on Lumikraz, which was based on a year over year change in the negotiations we have on reimbursement. So in France, For example, we have an early temporary access program, an ATU program. Since 2021, Louvinkrais has been available in France and we took a $22,000,000 accrual in the quarter For those sales on the basis of price negotiations we're having in France, so we had a number of events like that related to price in And as you mentioned, we are entering the donut hole for some of our products. So overall, I think unit volume growth, very strong, A few price effects on select products in the portfolio and a little bit of donut hole impact.

Operator

Thank you, Mohit. Our next question comes from Gregory Renza from RBC Capital Markets. Please go ahead. Your line is open.

Speaker 17

Great. Good morning, Bob and team. Congrats on the progress and thanks for taking my question. Bob, just circling back to The obesity market again and as you and the team focus on really being best, being first or and or best in class across markets. I'm just curious how you and the team view and anticipate how different the obesity market could look and how you see the unmet need morphing by the time A program from Amgen is ready for primetime.

Speaker 17

But would there be a need to look not just internally, but externally to accelerate those efforts, especially if things are evolving so quickly. Thanks again and congrats on the progress.

Speaker 2

We're very excited about what we see So far emerging from our early work in obesity, I think over time you got the sense of this from David Rees, this is likely to Be a heterogeneous disease, there are probably going to be a number of different ways to have to go at it. But what encourages us right now is what we think of as an emerging differentiated profile Our approach versus the competition and maybe Murdo, you want to just jump in and remind Gregory about the basis of differentiation that we see so far in our The competition and why we think that gives us a good foothold for entering the market.

Speaker 3

Yes. Thanks, Bob. I like the way the question was Sometimes gets framed as what are you going to do when with these entrenched products in the market. And I'd just like to tell people how young this market is and how much More is left to unfold. What we're seeing in the early days is we're seeing a lot of patients trying these products losing weight, But they're not persisting with their treatment and regaining weight.

Speaker 3

So we think that there's an opportunity in the market long term For a product that can bring about very strong weight loss, both Rapid and sustained over time with convenient dosing. And I think that that's Where 133 or miridabar capraglutide really has an opportunity to differentiate itself from what is available in the market today. We've seen the durability of that product between doses. We think based on the Phase 2 and the number of different dosing cohorts we have Being explored in that trial, we'll be able to find the right balance of the efficacy and the ability based on convenient dosing to Sustain that weight loss over time. And of course, the goal here is not just to lose weight, but to improve a number of sequelae or outcomes From people who carry extra weight over the course of their life and that's what we're starting to see with others reading out in event The trials will see more data as the medical congress has passed this next few months, but our hope is to bring about Real improvement in outcomes with a highly efficacious and highly convenient product like 133.

Operator

Thank you, Gregory. Our next question comes from Geoff Meacham from Bank of America. Please go ahead. Your line is open.

Speaker 1

Good morning, guys. Thanks so much for the question. Murdo, it's been a long time coming for Repatha infection. Are you guys finally hitting a commercial tipping point with payers or do you think there is an increasing interest among cardiologists? I guess I wasn't sure how The current market is and looking forward, how about the impact, how do you guys see it from a couple of the ongoing Phase 3s and 4s?

Speaker 1

Thank you.

Speaker 3

Thanks for the question, Jeff. Yes, it's been a bit of a journey and the COVID pandemic didn't help us in our efforts to Educate and convince cardiologists that they needed to do more to be more aggressive in treating their patients' LDL cholesterol. I do think we've reached a tipping point in cardiology, and I do think we've reached a tipping point with payers. We now have over 90% commercial life covered. We anticipate being able to continue to progress our Medicare Part D coverage And we're seeing the PCSK9 category driven primarily by our 80% share of that category Really, really starting to move now.

Speaker 3

Our new patient volume growth is good, not just in the U. S, but around the world. We are now seeing more and more primary care physicians using PCSK9s in combination with other drugs To more aggressively lower LDL in high risk ASCVD patients. So the phases are pretty clear, payer coverage established, Affordability for patients established, cardiologists now prescribing with frequency and now moving into primary care, And we'll be adding direct to consumer campaign investment to that mix. So yes, I think we've reached a tipping point on Repatha, Jeff, and I'm bullish on what we can do to further expand that product, both from a volume and net sales perspective.

Operator

Thank you, Jeff. Our next question comes from Chris Schott from JPMorgan. Please go ahead. Your line is open.

Speaker 18

Great. Thanks so much for the question. Just a question on longer term margins. So I guess post Horizon and I guess with the ramp of your pipeline, including some potentially very large Obesity studies over time. I guess just directionally, how should we be thinking about margins from here?

Speaker 18

I guess is this kind of 50% or slightly above 50% range A reasonable target for the company or just any considerations we should keep in mind as we kind of balance, I guess, horizon versus investment? Thank you.

Speaker 2

Well, we're not going to give updated margin guidance on this call, Chris, but I think we've been pretty clear about what the trail should look like. We're focused on remaining leading efficient player in our industry. We've been able to achieve leading operating margins over time. There's nothing that we see in the Horizon business specifically that would lead us to conclude differently from that. We expect that at a full run rate capitalizing on our in place infrastructure internationally and manufacturing and process development That the margins of that business will be attractive in our hands.

Speaker 2

And the reference This is Peter May to R and D spend earlier. Obviously, to the extent that we get into a number of Phase 3 trials in the middle years here of the decade For Lp. Delay and for obesity products, that may have an effect on overall margins, but we'll have plenty of time to talk about that in advance so that Nobody is surprised if the margins start moving around. So again, we have demonstrated a pretty consistent ability to manage the cost structure of the business And that's something that we're determined to maintain.

Operator

Thank you, Chris. Our next question comes from Evan Seigerman from BMO. Please go ahead. Your line is open.

Speaker 13

Hi, guys. Thank you so much for the color on this call today. So the growth in KRYSTEXX is pretty impressive. Wondering how the mentioned $1,000,000,000 run rate compares with your expectations going into the deal. And then taking a step back, we saw a JAMA article about the use of type Diabetes meds for gout.

Speaker 13

How are you seeing this in the broader gout space? Is this something we should be concerned about when it comes to KRYSTEXXA? Thank you.

Speaker 2

Maybe we will take this in 2 parts. First, with respect to KRYSTEXXA, I would say KRYSTEXXA is performing very well and we believed it would. Yes. And we think there is a tremendously large unmet medical need here and that KRYSTEXXA with methotrexate is Serving the marketplace well, so we are looking forward to working with our colleagues on it. And overall, I would say that The business is proceeding as we thought it would to this point.

Speaker 2

The things that we were that we thought were important to have in hand like The chronic indication for Tepesa like international datasets that were made available with the OPTIC J trial, Like the progress we've made in Brazil, etcetera, those were things that we wanted to have in hand and now do. And again, Uplizmo also performing very much In line as we expected it would. So we see 3 growth opportunities there and we see ways for the Amgen based business to add value to What Vikram will we be running now in our rare business area? And then with respect to the question on diabetes, I'll ask Dave. Yes.

Speaker 5

I mean, I think The broader context here is important. These patients have severe uncontrolled gout. They Are often facing amputations for example because of the severity of the disease and There are large number of these patients that are currently not being served in the market in clinical practice. So our focus is on reaching those patients where the quality of life impediments are quite significant and the effects of the drug can be quite Dramatic in improving the disease course and improving that sort of quality of life. So that's the focus right now And I wouldn't get distracted by some of the other potential associations.

Speaker 2

Operator, I think we have 2 more calls In the log here, so why don't we take 2 more and then we'll thank our colleagues and let them get on with the day.

Operator

Certainly. Thank you, Evan. Our next question comes from Tim Anderson from Wolfe Research. Please go ahead. Your line is open.

Speaker 2

Thank you. On AMG133, maybe this is a silly question, but is it at all possible that you can start Phase 3 in 2024, the main way to do this would be to do an early or interim look of sorts At the Phase 2 trial before the primary completion date, and I know you're guiding for top line on that in late 2024. Thank you.

Speaker 5

Yes. I mean as we go through 2024, we'll give guidance on when we expect the Phase 3 program to launch. As is Customary in these programs, we will take an interim look. That will remain blinded. We will not release that Because this is a 52 week study, but that will help at least guide our thinking.

Speaker 5

Also recall that the FDA requires a certain safety database Before you launch Phase 3 trials here and so as we get into next year and start to have those conversations, we'll be able to give More definitive guidance as to when you can expect the launch of the Phase 3 program and what that suite of studies might look like.

Speaker 4

Thank you, Tim.

Operator

Thank you, Tim. Our last question will come from Collin Bristow from UBS. Please go ahead. Your line is open.

Speaker 19

Good morning and thanks for taking the questions. Maybe just a quick follow-up on 133. Just as we think about this from a commercial perspective, This is obviously an antibody backbone. It's going to be an injectable just in light of margin that's achievable with this. Just Help us think through that.

Speaker 19

Thanks.

Speaker 3

Well, Colin, you rightly point out that this is an antibody backbone. The properties of that, obviously, as I was alluding to earlier, could be that you can dose it much less frequently than you have to With the current therapies on the market, we also think given the potential differentiation on efficacy And possibly tolerability that we will be able to establish a very strong position in the market for people who need Rapid, deep and sustained weight loss that they can manage over time so that they can gain the benefits, the Reduction in cardiovascular risk, improvement in outcomes from that treatment. But we expect, As Dave said, to develop this product across a suite of Phase 3 experiments and we expect to be able to Take a decent share of the market, which will drive a good return on our investment in that product.

Operator

Thank you, Colin. I would now like to turn the call back over to Bob Bradway for closing remarks.

Speaker 2

Okay. Well, let me thank all of you for joining us this morning. And we hope that the choice of doing this in the morning frees you up to go enjoy the Afternoon and evening of trick or treating wherever you are. But we again appreciate your support. It's been an eventful few months at Amgen and we look forward to having an

Operator

This concludes our 2023 Q3 earnings call. You may now disconnect.

Powered by Quartr
Earnings Conference Call
Amgen Q3 2023
00:00 / 00:00